Question:
The Phillips curve shows
The Phillips curve shows
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Phillips curve shows the short-run trade-off between inflation and unemployment.
Updated On: May 22, 2026
- A positive relationship between the real and nominal wage
- An inverse relationship between rate of inflation and nominal wage
- An inverse relationship between the rate of inflation and the rate of unemployment
- A positive relationship between rate of inflation and real wage
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The Correct Option is C
Solution and Explanation
Concept: The Phillips curve shows the relationship between inflation and unemployment. It is one of the important concepts in macroeconomics.
Step 1: Understanding the Phillips curve.
The Phillips curve states that there is a trade-off between inflation and unemployment in the short run. \[ \text{Inflation} \uparrow \Rightarrow \text{Unemployment} \downarrow \] \[ \text{Inflation} \downarrow \Rightarrow \text{Unemployment} \uparrow \]
Step 2: Understanding inverse relationship.
An inverse relationship means when one variable increases, the other variable decreases. \[ \text{Inverse relationship} = \text{Opposite movement} \]
Step 3: Applying to inflation and unemployment.
According to the Phillips curve, higher inflation is generally associated with lower unemployment in the short run. Therefore, the correct answer is an inverse relationship between the rate of inflation and the rate of unemployment.
Step 1: Understanding the Phillips curve.
The Phillips curve states that there is a trade-off between inflation and unemployment in the short run. \[ \text{Inflation} \uparrow \Rightarrow \text{Unemployment} \downarrow \] \[ \text{Inflation} \downarrow \Rightarrow \text{Unemployment} \uparrow \]
Step 2: Understanding inverse relationship.
An inverse relationship means when one variable increases, the other variable decreases. \[ \text{Inverse relationship} = \text{Opposite movement} \]
Step 3: Applying to inflation and unemployment.
According to the Phillips curve, higher inflation is generally associated with lower unemployment in the short run. Therefore, the correct answer is an inverse relationship between the rate of inflation and the rate of unemployment.
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